Will Chinese Companies Rule the Future of the Automotive Industry?

China's buying up the automotive industry piece by piece

It’s already happening. Chinese firms are buying into the automotive industry quickly, and one day, if things continue on the current route, the automotive industry will be less about American, Japanese, and European automakers and more about Chinese car companies. AutoGuide reported that Chinese firms have made over 120 big investments in the North America automotive industry that top $5 billion since 2010. Fox Business reported that worldwide, Chinese firms have invested more than $34 billion since 2008.

China has long supplied parts and components for automobiles, but now things have kicked up a notch in the last few years with investments being made in electric car companies and advanced automotive technology. AutoGuide points to Lucid Motors, Karma, and Faraday Future as evidence of Chinese investors’ impact on the industry. Essentially, China could take over the industry without even moving its domestic Chinese brands to the U.S. or the rest of the world. Instead of moving in the country’s own brands, it seems that Chinese investors are comfortable either coming up with new, innovative companies or simply buying up existing ones.

Chinese Investors are Making Waves

Look to Zhejiang Geely’s purchase of Volvo. The Chinese owned company is backing Volvo and offering financial and other kinds of support. Volvo has and is still coming out with exceptional vehicles. The new XC90 is fantastic and the S90 flagship is now exported from China (where it’s built) to Europe and other countries.

That’s just one example. A far more interesting look at how China is taking over the automotive industry comes from the parts and components side of things. According to Fox Business, Chinese businesses have sunk billions of dollars into all kinds of automotive businesses from glass and tire makers to more advanced technology. Tire maker Pirelli was purchased in 2015 by China National Chemical Corporation for $7.86 billion.

Fox Business noted that Michael Dunne, president of Dunne Automotive, said that China-based investors and firms have a strategic vision and are working hard to take over the automotive industry piece by piece. This means there’s no end in sight soon, and Chinese investors will continue to buy up what they can of the industry. “There is no question their ambition is to be number one,” Dunne told reporters.

China's Investments Aren't Just About China

These Chinese companies aren’t necessarily looking to take all the manufacturing and all the money and businesses back to China. Geely, for example, is investing $500 million in a Volvo plant in Ridgeville, SC, that will employ a couple thousand workers, according to Fox Business. Also, other automotive projects backed by Chinese companies have and will cost billions of dollars and employ thousands, but that’s all part of the Chinese takeover of the auto industry. Fox Business points to the Fuyao Glass Industry Group Co.’s spend of $1 billion on U.S. manufacturing facilities.

Not all Chinese firms are outright buying up companies. Many buy a certain stake in a company and become a player that way. Tesla recently let Tencent Holdings Ltd. buy 5 percent stake in the company for $1.8 billion. It will be interesting to see if Tencent Holdings is able to buy more of Tesla as time goes on.

China is becoming more involved in the industry in part due to the fact that the country’s people are more interested and able to purchase cars. According to AutoGuide, in 2016, 28 million vehicles were sold there. During that same time in the U.S. 17.5 million vehicles sold. In China, brands like Cadillac and Buick are doing very well. According to The Motley Fool, Cadillac experienced 15 straight months of year-over-year sales increases. In May alone, sales jumped 65 percent year-over-year. So, while China may seem to be invading the industry, it also seems that it’s trying to control it for its own people. Still, its influence is and will continue to be global.

If you look at car companies that operate in China currently, they’re all connected to China in some way. Dunne told reporters that in order for companies like General Motors, Ford, and Volkswagen to do business in China, the Chinese government insisted on large import fees or joint ventures with domestic Chinese companies. As a result, companies foreign to China are integrally connected to Chinese companies. General Motors in China is SAIC-GM, Volkswagen is closely connected with a company call FAW, and Peugeot-Citroen has a very close relationship with Dongeng, according to Auto Guide. This means that the companies never operate solely on their own, and Chinese entities influence American and European automakers within China.

The bottom line is that even though you may not buy a car with a Chinese brand’s badge on the front of it, essentially every vehicle you drive will have something from China in it, whether it be the glass in your windshield or the vehicle’s design for its powertrain. China has a lot of money, and it’s willing to put that money into the auto industry in the form of investments. If things continue to progress as they have for the past decade, there will be no area of the automotive industry that is untouched by Chinese influence.